Correlation Between Technology Select and SPDR FactSet
Can any of the company-specific risk be diversified away by investing in both Technology Select and SPDR FactSet at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Technology Select and SPDR FactSet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Technology Select Sector and SPDR FactSet Innovative, you can compare the effects of market volatilities on Technology Select and SPDR FactSet and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Technology Select with a short position of SPDR FactSet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Technology Select and SPDR FactSet.
Diversification Opportunities for Technology Select and SPDR FactSet
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Technology and SPDR is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Technology Select Sector and SPDR FactSet Innovative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR FactSet Innovative and Technology Select is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Technology Select Sector are associated (or correlated) with SPDR FactSet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR FactSet Innovative has no effect on the direction of Technology Select i.e., Technology Select and SPDR FactSet go up and down completely randomly.
Pair Corralation between Technology Select and SPDR FactSet
Considering the 90-day investment horizon Technology Select Sector is expected to under-perform the SPDR FactSet. But the etf apears to be less risky and, when comparing its historical volatility, Technology Select Sector is 1.31 times less risky than SPDR FactSet. The etf trades about -0.02 of its potential returns per unit of risk. The SPDR FactSet Innovative is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 16,097 in SPDR FactSet Innovative on August 30, 2024 and sell it today you would earn a total of 1,934 from holding SPDR FactSet Innovative or generate 12.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Technology Select Sector vs. SPDR FactSet Innovative
Performance |
| Timeline |
| Technology Select Sector |
| SPDR FactSet Innovative |
Technology Select and SPDR FactSet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Technology Select and SPDR FactSet
The main advantage of trading using opposite Technology Select and SPDR FactSet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Technology Select position performs unexpectedly, SPDR FactSet can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in SPDR FactSet will offset losses from the drop in SPDR FactSet's long position.| Technology Select vs. First Trust Exchange Traded | Technology Select vs. Ultimus Managers Trust | Technology Select vs. Horizon Kinetics Medical | Technology Select vs. Harbor Health Care |
| SPDR FactSet vs. SPDR SP Software | SPDR FactSet vs. SPDR Morgan Stanley | SPDR FactSet vs. SPDR SP Health |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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